Sri Lanka's central bank keeps overnight policy rate unchanged

"There may be further room for easing but we will closely monitor developments and see if it is warranted," CBSL governor P Weerasinghe said.

The bank’s monetary policy board is of the view that the current monetary policy stance will help steer inflation towards the target of 5 per cent in the period ahead, while supporting growth, a CBSL release said.

Core inflation will continue to gradually accelerate in the coming months, reflecting the steady recovery in the economy’s demand conditions.

Backed by a $2.9-billion programme from the International Monetary Fund, the country is gradually recovering from its worst financial crisis in decades, triggered by a record dollar shortage three years ago.

The inflation rate was minus 0.6 per cent in June, but CBSL expects it to turn positive this quarter, ending almost a year of deflation.

The United States initially imposed 44-per cent tariffs on Sri Lankan goods, but reduced that to 30 per cent earlier this month. Colombo resumed talks with Washington last week to reduce the duties further before they become effective on August 1.

ALCHEMPro News Desk (DS)